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Seat Pleasant, Maryland, might have a pleasant name, but three
businesses located there aren’t feeling very welcome. According to The
Washington Post, the town is seeking
to impose a special property tax assessment on only three properties, such
that the businesses located there could see their taxes increase 800 percent.
In response, the businesses claim the tax increase is an effort to drive them
out of town. The case presents an interesting insight into the procedure for
imposing special tax assessments.

Under Maryland law, towns and counties are authorized to
impose a special assessment on a limited group of property owners to fund
improvements which would benefit those properties. The amount of the assessment
is supposed to reflect the enhanced value of the property resulting from the
improvements made, and the assessment may not exceed the estimated value of the
conferred benefit. The special assessment functions as lien upon the affected
properties. These limitations mirror those in other states. In Virginia,
special assessments can only be imposed on properties abutting planned
improvements and cannot be higher than the benefits provided to the abutting
properties. Arkansas has similar limitations but a very different method of
imposing them — special assessment districts must be approved by a majority of
property owners in the locality affected.

Seat Pleasant’s town
charter allows for special assessments upon property in a specific area for
“special benefits conferred upon the property” through the construction of
water mains, sewers, sidewalks, and the like. The amount cannot exceed the
value of the benefits, and the amount cannot exceed 25 percent of the assessed
value of the property, including the future effect of the improvements. Before
imposing the assessment through an ordinance, the town council must hold a
public hearing after notice has been sent to the affected property owners. The
notice should include the nature and extent of the proposed project along with
its cost, and though the city clerk must demonstrate that notice was mailed,
the failure of any owner to receive the notice does not invalidate the hearing.
The assessment can be appealed to the Circuit Court for the county within ten
days after it is approved by the council.

In this instance, the property owners claim they never
received any notices about the hearing, which was held a week after the council
proposed the ordinance on May 8. As for the benefit which motivated the
assessment, the mayor of Seat Pleasant has said that the funds raised will
“benefit the whole city,” according to the Post. The properties, a discount
market, a liquor store, and a Chinese takeout restaurant, are all located close
to the same intersection.

The property owners have filed suit, claiming that the
imposition of the assessment violated the town charter and also their 14th
Amendment rights by being deprived of property without due process of law. The property
owners are also claiming that the selection of which business to assess was
done in violation of their rights to equal protection. According to the owners,
the town is predominantly African-American, but two of the business owners are
Chinese-American and another is Jewish, and the owners believe that was the
reason they were singled out for the assessment as the Post reports.

A pretrial hearing in the case is scheduled for April 2. The
case is Franco v. City of Seat Pleasant Maryland, Docket No. CAL1731330, in the
Circuit Court for Prince George’s County.

Continue the discussion on Bloomberg Tax’s State Tax Group
on LinkedIn: What limitations, if any, should be placed on a local
authority’s ability to impose special assessments?

Get a free trial to Bloomberg Tax: State, a comprehensive research
service that provides deep analysis and time-saving practice tools to help
practitioners make well-informed decisions.

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